March 27, 2026

U.S. Tariff Refund Mechanics, a Section 122 Stopgap, and a Rapid Pivot to Section 301

Hector Ibarra, Zhe Liu, Tiffany Rowe Parker Poe Adams & Bernstein LLP + Follow Contact LinkedIn Facebook X Send Embed While the law is settled, the refund path is not.

The tariff landscape shifted decisively after the U.S. Supreme Court held that the president lacks authority under the International Emergency Economic Powers Act (IEEPA) to impose tariffs to regulate foreign trade during a national emergency, invalidating the sweeping IEEPA‑based duties collected since February 2025. While the decision resolved the merits, it left unanswered the practical issue most important to importers: how and when unlawfully collected duties would be refunded.

On March 2, 2026, the U.S. Court of Appeals for the Federal Circuit lifted the stay on its previously issued mandate, directing the U.S. Court of International Trade (CIT) to address the refunds process. The mandate reopened the remedial phase, tasking the CIT with requiring U.S. Customs and Border Protection (CBP) to determine how refunds would be administered, subject to the court’s supervision. On March 4, the CIT ordered CBP to liquidate all entries and reliquidate those still subject to final determinations without regard to IEEPA duties. Two days later, however, the CIT paused immediate compliance after CBP explained the operational burden of tens of millions of entries requiring refunds and the inability of the existing Automated Commercial Environment (ACE) system to automatically process without significant manual intervention.

Since then, CBP has been developing a new refund workflow that will be integrated into the ACE system. The new module — described as CAPE (Consolidated Administration and Processing of Entries) — will automate the refund process. On March 12, 2026, the CIT found CBP’s progress “satisfactory” and ordered continued status updates, while maintaining the pause.

Section 122 as a Temporary Replacement: Statutory Constraints and Two Early Challenges

On the day of the Supreme Court’s decision, the Trump administration turned to Section 122 of the Trade Act of 1974 and issued Proclamation 11012, which authorizes “temporary import surcharges” for up to 150 days when “fundamental international payments problems” require special import measures. These temporary tariffs may be used in limited circumstances, such as to deal with “large and serious” balance-of-payments deficits, significant dollar depreciation, or an international balance-of-payments disequilibrium. The statute limits the discretion to implement these tariffs through nondiscrimination and uniformity requirements for country and product coverage, and they may not be used to protect domestic industries from import competition.

Section 122 tariffs were challenged almost immediately by two actions. A coalition of nearly 22 states argues the proclamation fails the statute’s balance‑of‑payments predicates by conflating “trade deficits” with “payments deficits” and by adopting exemptions inconsistent with nondiscrimination requirements. A second case filed by private plaintiffs Burlap & Barrel and Basic Fun makes similar statutory arguments and adds constitutional arguments grounded in separation of powers concerns.

Two practical concerns bear on the success of challenges to Section 122 tariffs. The first is whether the courts can move fast enough before the statute’s 150‑day ceiling expires. Although Section 122 challenges present a more fact‑dependent inquiry than the IEEPA litigation, the complaints focus heavily on statutory language, minimizing the court’s need to consider the president’s economic judgments to justify the tariffs. As a result, the most meaningful judicial decision may be an early ruling that the tariffs do not comply with the statutory requirements rather than a final merits decision (given the 150‑day statutory lifespan).

The second question is whether Section 122 is being used as a bridge for more durable tariff authorities or if the administration intends to seek congressional approval to extend the period beyond 150 days. The statute’s strict time limit, capped rate, and balance‑of‑payments focus make serial renewals legally and politically vulnerable. Viewed in context, the proclamation appears to function primarily as a stopgap while the administration pivots toward more durable tariffs under Section 301.

Section 301 Investigations: Building the Next Durable Tariff Platform

Parallel to the Section 122 stopgap — and likely designed to outlast it — the administration has moved aggressively to initiate two accelerated investigations under Section 301 of the Trade Act of 1974. Section 301 authorizes the U.S. Trade Representative (USTR) to investigate foreign acts, policies, and practices that are believed to be “unreasonable or discriminatory” or to burden U.S. commerce. If the investigation results in such a determination, the USTR may take retaliatory measures, including imposition of tariffs, suspension of agreement concessions, or securing agreement that the foreign country will cease the offending acts. Unlike Section 122, Section 301 is not limited to the amount or duration of the tariffs.

Two Section 301(b) investigations were announced on March 11, 2026. The first targets structural excess capacity and overproduction in manufacturing sectors across sixteen economies, including China, the European Union, Japan, and India. The second is broader still, covering approximately sixty economies, and focused on alleged failures to ban goods produced with forced labor. The USTR will hold a hearing in connection with the investigation starting May 5, 2026.

USTR has framed these investigations as a durable policy mechanism capable of sustaining tariffs or supporting negotiated outcomes. So far, early reactions suggest divergent national responses and strategies. Some economies, particularly strategic allies and major exporters, appear inclined toward accommodation, seeking negotiated resolution through investment commitments that limit tariff exposure. Others have adopted a more confrontational posture, criticizing the investigations as destabilizing global supply chains. These dynamics are unfolding against a backdrop of broader geopolitical instability, including active conflict involving Iran, reinforcing the likelihood that Section 301 investigations will be used by the administration as an instrument of broader economic and strategic policy in negotiations with foreign governments over investment commitments, market access, or compliance reforms.

For businesses, the practical implication of these 301 investigations will be determined based on the investigations’ outcomes. In some cases, they may create opportunities rather than risks, particularly if negotiations lead to incentives for investment in U.S.‑based manufacturing and other investments. Companies should therefore move proactively: inventorying exposure by country of origin, imports considered by the USTR to exceed domestic production capacity, and potential forced‑labor compliance throughout supply chains that originate in or cross through countries under investigation.

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• Court of International Trade Pauses Immediate IEEPA Refunds While Leaving Sweeping Repayment Order Intact
• Federal Circuit Mandate Clears the Way for Next Phase of IEEPA Refund Litigation
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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